Hostile takeover bid sets Japanese paper world on fire

AP , TOKYO

Thu, Aug 03, 2006 - Page 10

Oji Paper Co, Japan's largest paper producer, began a hostile bid yesterday for rival Hokuetsu Paper Mills Ltd in a deal that would create the world's No. 5 paper maker.

The move was billed as an unprecedented takeover battle by one Japanese company against another in the same industry.

The tender offer bid comes a week after Hokuetsu rejected a first merger proposal from Oji and said it would instead go ahead with an previously planned tie-up with trading company Mitsubishi Corp.

Oji said in a release issued late on Tuesday that it would spend at least ¥80.66 billion (US$707 million) to take a controlling 61 percent stake in Hokuetsu. The tender offer will run through Sept. 4.

Local media were describing Oji's offer as a rare hostile takeover bid for a rival in a country where negotiation, not direct appeals to shareholders, typically drive business deals. It is especially rare for such a battle to erupt between rivals in the same industry, commentators say.

If Hokuetsu seals its partnership with Mitsubishi, Oji said it will pursue the takeover with an offer of ¥800 a share. But if the tie-up is scrapped, Oji said it would pay ¥860 a share.

Both prices offer a premium over Hokuetsu's closing price of ¥784 on Tuesday. Mitsubishi plans to buy the shares on Monday. The higher bid offer of ¥860 would value Hokuetsu at around ¥141 billion.

Hokuetsu, based in northern Niigata prefecture and employing 2,822 people, said yesterday that its board rejected Oji's offer and had set up an independent panel to develop a defense plan.

Oji said its offer makes better sense because it would combine Hokuetsu's efficient business operations with Oji's bigger corporate scale.